Last Updated on Sep 23, 2024 by Harshit Singh
Over the past decade, consumer behaviour in India has undergone a remarkable transformation. It’s fascinating to see how people’s attitudes towards spending have changed—from initially resisting purchases altogether to now focusing on resisting unnecessary items.
The shift in mindset is a testament to the progress made in both economic conditions and consumer awareness. By examining the latest data on consumer spending, the picture becomes even clearer. In 2022, India’s consumer spending reached $2,049.57 billion, marking a 6.45% increase from the previous year. To put this into perspective, back in 2012, consumer spending was around $1,031.7 billion, which means it has nearly doubled in a decade (data from the World Bank). The annual growth of the Indian consumption market was around 6.7% during FY15-FY20 and is projected to be 7.1% during FY21-FY25. India consumer spending for 2021 was $1,925.31B, a 17.62% increase from 2020. India consumer spending for 2022 was $2,068.84B, a 7.45% increase from 2021.
To see the rise in consumer market we should focus more on electronics market too,
Table of Contents
Key Indicator- “Rise in Electronic market”
- In FY23 (April-November), India’s electronics export sector grew by 13.8%, marking the highest growth in the last six years.
- India’s smartphone market revenue crossed US$ 38 billion in 2021, showing a 27% year-on-year growth.
- These figures indicate India’s consumer market is thriving at an unprecedented rate.
- Foreign Direct Investment (FDI) in the Appliances and Consumer Electronics (ACE) industry nearly doubled, reaching US$ 481 million by June 2022, compared to US$ 198 million in 2021.
- Between April 2000 and June 2023, electronic goods attracted US$ 4.32 billion in FDI inflows.
- The surge in foreign investment highlights global confidence in India’s position as a key consumer market.
The driving forces in consumer behaviour?
- Middle-Class Influence:
The middle class plays a pivotal role in this shift. With increasing disposable income and a favourable population composition, this demographic has become the backbone of India’s consumer market, driving much of its growth.
- Changing Attitudes Towards Expenses:
Indian consumers are moving from viewing expenses as burdens to embracing spending as a part of their lifestyle. This shift in mindset is not just about acquiring goods but also about enhancing life experiences.
- Demographic Advantage:
India’s youth-centric demographic gives the country a unique advantage. Young consumers are ambitious and ready to spend, fueling the rapid expansion of the market.
- Impact of Social Media:
Social media has become a powerful force, influencing consumer behaviour, especially among the youth. With aspirations driven by what they see online, today’s consumers seek products and experiences that enhance their lifestyles and self-presentation.
- Easy Finance Availability:
With the availability of EMIs, consumers can now purchase products—whether premium or essential—at a much lower initial cost, without the stress of paying the full amount upfront. This has made high-value purchases more accessible and convenient for many.
- Mindset Shift:
Consumers today are more focused on enjoying the present rather than saving solely for the future, as previous generations did. They prioritise immediate benefits and experiences, aiming to make the most of their current lives rather than deferring enjoyment.
To sum up, this shift in consumer behaviour is shaping India’s market in previously unimaginable ways. The growing middle class increased disposable incomes, and the influence of technology and social media have transformed the way people think about spending.
Impact on Economy
From an economic standpoint, this surge in consumer spending is indeed an exciting period for the Indian economy. Increased consumption drives economic growth, creates jobs, and stimulates various industries, leading to a healthy cycle of prosperity. The current boom seems to be largely driven by push demand—consumers actively pursuing products and services due to increasing disposable income, easy access to credit, and the influence of social media.
Side-effect of Consumption burst
However, while this rapid consumption growth is beneficial in the short term, there are potential risks that could emerge in the future.
- Concern lies in the long-term financial security of individuals. As consumers shift focus from saving for the future to enjoying their present earnings, they may neglect essential financial planning, particularly for retirement. This could lead to significant challenges down the road, especially as life expectancy increases and the need for sufficient savings to cover living and medical expenses becomes more pressing.
- The reliance on credit and easy financing, while making high-value purchases accessible, could also result in a culture of debt. If people continue to prioritise immediate gratification over building long-term financial stability, they might find themselves struggling in their later years.
- The absence of adequate savings, coupled with rising costs of healthcare and other essentials, could leave future generations financially vulnerable.
Strategies to tackle this issues:
- Annuities: Annuities are financial products that can be particularly beneficial for older couples. By investing in a lump sum or regular premiums, you can secure a guaranteed monthly payout for a specified period or even for life. Deferred annuities, in particular, are effective in mitigating longevity risk
- Goal-Based Investing: It’s crucial to align investments with specific future goals. For example, if you plan to purchase a car in two years, save and invest instead of dipping into your retirement funds. This helps preserve the savings set aside for your later years.
In essence, while the current surge in consumption is a powerful driver of economic growth, it’s important to strike a balance. Encouraging responsible spending, fostering a culture of savings, and promoting financial literacy will be crucial to ensuring that this consumer-driven growth doesn’t come at the expense of long-term financial well-being. Without proper preparation, the coming generations may face significant challenges in securing their financial futures, especially in a world where retirement needs are becoming more complex and expensive.
- India’s Consumer Boom: Thriving Today, Planning for Tomorrow - Sep 23, 2024
